Teacher remuneration – do they really have cause to moan?

Some teachers are brilliant, dedicated people who perform miracles with difficult kids. Some.

Today a lot of teachers went on strike over pay and pensions (and some other things). Well, it is understandable that nobody wants to see any drop in their overall remuneration, but let’s take a quick look at their financial situation. I think they are actually doing pretty well. Sure they work hard and it’s stressful, but we all do, and what job isn’t?

I did a quick search for a reference for their pay and pensions.

Click to access nasuwt_011343.pdf

lists the salary scales for those teachers covered by the biggest union. The bottom end is an unimpressive £21.5k per year, but the bottom end on almost every career is pretty low so that doesn’t tell us much. The top is pretty high, but I actually want to focus on their pensions because they don’t seem to understand how fantastic a deal they get. A lot of teachers don’t stay in teaching very long because they find it too stressful or hard work, but I don’t have any stats on where they go next. If they stay in the public sector, then presumably they can transfer their pensions to another public sector scheme. Pensions are extraordinarily generous in the public sector, and the lower you are in the career path, the higher the proportion of your salary they make up since they are based on final salary. So…  for those teachers who stay in teaching or move elsewhere in the public sector, what is the full package worth, even then? Let’s see.

Let’s filter first. Rubbish teachers don’t deserve to be paid well, and they cause a lifetime of big problems for their unfortunate pupils, so I don’t care if they are badly paid. It is better if they leave and find another job where they can do less damage.

Good teachers can expect to climb high in the career structure. A few of the good teachers will become heads or department heads. For those that are quite good but don’t make it that far, they can expect to reach about £47k. A head teacher can reach £105k but not many teachers reach that level of course. Currently, each year that a teacher works, they earn 1/60th of final salary, regardless of their salary at the moment. From 2015 that will change to career average, a very different figure. Average life expectancy at age 24 right now is about 83, and retirement age for a young teacher will be 67, so they’ll get a pension for an average of 16 years, but that assumes no further progress is made on longevity. Actually, they will almost certainly live a lot longer than that, and get far more total pension. A starter teacher on the lowest salary point possible who will later progress to the top of their profession earns a miserly £21.5k salary, but gets a whole year’s worth of contribution to their pension. A pension that will possibly be 43/60ths of £105k, i.e. £75k, for 16 years, a total of £1.2M. Averaged over their working life, (since they get one year contribution per year even at the bottom) that gives a pension value of £28,000. A teacher on a salary of £21.5k effectively gets a pension fund addition of £28k! Being fair, not many teachers will get that much, but a few will. A second tier teacher that ‘only’ reaches a £57.5k final salary would get a pension of £41k, adding to £660k in total over their retirement, worth £15.3k per year on top of whatever salary they earn. So a good teacher on a salary of £45k may really be earning between £60k and £73k once their pensions are included. For those that don’t ever get to the top, the figures are of course less.

This all looks pretty rosy and teachers of course would like to keep this scheme, but as it stands it will be replaced in April 2015 by a new scheme based on career average earnings. That will have a huge impact on pension value for the top performers, but a more modest (though still significant)  impact on the ‘ordinary’ teacher.

But there is another component that benefits some teachers’ remuneration. Teachers on £45k are barely into the high rate tax bracket, and without wanting to generalise too much, teachers are often married to other teachers. Two teachers living together pay very low tax on their combined income. In many professional couples, one pays a fortune in tax and the other pays hardly any. It is very rare in other occupations for couples to have their salaries split so perfectly to incur minimal tax.

So, teachers at the moment are one of the most privileged groups in society and are facing being forced into a scheme more like the rest of us. I can understand why they want to keep such a generous reward scheme as they had, but I really can’t feel much sympathy for them striking.